But here’s the thing: Tim Cook is a caretaker of a company which
is designed to be around in perpetuity. Icahn, on the other hand,
for all that he claims that “there is nothing short term” about
his intentions, still has an exit strategy: he wants to buy low,
drive the share price up through shareholder activism, and sell
high. Apple should go along with Icahn’s plans only if they
increase the long-term value of the company — and it’s pretty
obvious that they don’t: Icahn is, at heart, advising Apple to
have both large borrowings and a large cash pile at the same time.
Which is bonkers.
Easily the best piece I’ve read regarding Carl Icahn’s desire to see Apple mortgage itself, and, really, a spot-on big-picture summary of what Apple is and should be:
Debt makes sense when you need money to invest today, and can
repay that money with a substantial future income stream. Apple is
in the exact opposite situation: it needs no money to invest
today, while its long-term future income stream is quite
uncertain. So it makes sense to save up in flush years, like it
has been doing. It will continue to create amazing new products;
what’s less clear is whether any of those new products will have
the ability to become a world-conquering profit monster like the
iPhone. The job of the markets is simply to price the shares
accordingly; it’s not the job of management to change the deep
structure of the company just to make the markets happy.
★ Wednesday, 30 October 2013